U.S. News: U.S. Shift on Global Tax Floor Wins Support

"Germany and France welcomed the Biden administration's new acceptance of a minimum corporate tax rate as low as 15%, possibly smoothing the way to a global agreement as soon as July that could transform how international businesses are taxed.

The Treasury's new position, announced Thursday, would see businesses pay a minimum tax rateof 15% on their overseas profits, below the 21%level it has been seeking for U.S.-based companies' foreign income.

At a meeting of European Union finance ministers Thursday, Germany and France expressed enthusiasm for the plan. The two governments backed the higher rate, but indicated that the lower rate would find wider support among smaller countries.

"This is really a big progress," said Olaf Scholz, Germany's finance minister. "I'm now very happy that we will have the chance that this deal we are working on for so long can happen in the summer."

"We can live with 15%," said his French counterpart, Bruno Le Maire.

But it isn't clear if the move will win over small economies that have used low taxes to attract foreign investment, including Ireland. The country has become the European base for many large U.S. tech companies whose efforts to limit their tax bills have prompted the proposed overhaul of the global rules. Challenges also await domestically as the Biden administration tries to get its plan through Congress.

Some European officials think it is possible that an agreement on the principles underpinning the new rules could be reached by Treasury chiefs of the Group of 20 leading economies when they meet in early July in Italy.

At stake is whether some of the largest economies can avoid a trade war over whether and how to tax profits from some of the world's largest tech companies. Several countries, including France, the U.K., and Italy, have implemented tech-specific taxes. The U.S. has threatened tariffs if the taxes aren't rescinded, but the countries have said they won't do so until there is an overall agreement.

There are two sets of intertwined tax talks under way.

One focuses on where corporations' income should be taxed, with big European countries saying big companies, particularly U.S. tech giants, pay too little tax in the countries where they sell to consumers.The second track concerns the talks on a global minimum tax. Both tracks are being conducted through the Organization for Economic Cooperation and Development.

Big tech firms argue that they need certainty in tax rules, rather than a patchwork of national taxes -- and some privately accept that a global deal may mean a hike in their tax bills. They support the OECD talks.

Ireland is one of the countries that resisted the early U.S. proposal for a minimum tax rate. Ireland's tax rate stands at 12.5%, not far below the new proposed minimum.

Big countries say the tax competition that Ireland advocates is a race to the bottom that deprives them of the resources needed to invest and recover from the Covid-19 pandemic. 

If enough large countries buy in, they can use their clout to enforce a minimum tax by limiting deductions of companies from countries without minimum taxes." [1]

Lithuanian liberals fail to repeat Irish fraud with low taxes. Life goes better and better every day. 

1. U.S. News: U.S. Shift on Global Tax Floor Wins Support
Hannon, Paul; Rubin, Richard. Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]22 May 2021: A.4.